Aided by large rises in premium rates, CU increased its UK premium income from general insurance by 19 per cent to pounds 709.9m and the group total by 9 per cent to pounds 1,554m.

Group underwriting losses fell from pounds 228.3m to pounds 205.2m, while investment income slipped to pounds 129.4m.

Income from life insurance also grew strongly, rising by 22 per cent to pounds 823.2m. Life profits for the half were pounds 3m lower at pounds 50.7m because of the costs of acquiring new business.

UK operations made a second- quarter profit of pounds 12.5m to produce an interim profit of pounds 9.5m, against a loss last year of pounds 16.5m. The underwriting loss was less than pounds 10m better at pounds 95.9m.

CU was held back by the pounds 15m it set aside to pay for the damage caused by the bomb that destroyed its headquarters. Mr Brend said the Association of British Insurers had contacted the Government to point out the problems posed for insurers by increased terrorist activity.

Tony Wyand, a member of the three-man executive team that heads CU, said the recent falls in the UK stock market were not enough to persuade the company to invest more of its equity portfolio in the UK.

He said CU had for a long time 'felt that the UK equity market did not represent good value in comparison with overseas markets'.